2015 (10) TMI 2108 - AT - Income Tax

Penalty levied under S.271C - non deduction of TDS - CIT(A) deleted penalty levy - Held that - The provisions of S.271C are subject to the provisions of S.273B of the Act. As per S.273B of the Act, no penalty shall be leviable under the sections mentioned therein, if the assessee proves that there was a reasonable cause for the failure under the said provisions. In the present case the assessee has submitted an explanation for the defaults alleged against it, and even a perusal of the orders under S.201(1) and 201(1A) make it clear that the Assessing Officer has summarily raised the demands. It appears that assessee s explanation was not called for or was not considered in detail. From the narration of the assessee s explanation as given above, as find that most of the expenses like lorry hire charges, truck operating expenses, business promotion expenses, postage expenses etc. are not subject to TDS provisions. As regards the other payments, the assessee s explanation that it bona-fidely believed that the TDS provisions are not applicable to the assessee seems to be reasonable. In view of the same, find no reason to interfere with the order of the CIT(A) on this issue, particularly, as also there is no loss to the Revenue, as observed by the CIT(A) since the assessee has remitted the TDS from its own sources and the payees have also not claimed the credit for the same. - Decided in favour of assessee.

Summary

Issues:
Revenue appeals against deletion of penalty under S.271C for non-deduction of TDS on expenses incurred by the assessee for assessment years 2006-07 to 2008-09.

Analysis:
1. Background: The assessee, engaged in transportation business, faced penalty proceedings under S.271C for not deducting TDS on various expenses. The Assessing Officer held TDS was deductible under different sections of the Income Tax Act, treating the assessee as in default and raising demands for TDS and interest.

2. Assessee's Contentions: The assessee contended that TDS provisions did not apply to various expenses like lorry charges, truck operating expenses, business promotion expenses, postage, printing, stationery, rent, consultancy charges, legal expenses, and more. They argued that they believed in good faith that TDS was not applicable to these payments.

3. CIT(A) Decision: The CIT(A) observed that the assessee operated in an unorganized sector and dealt with truck operators, hence not deducting TDS. The assessee paid TDS from its own funds, not reducing it from payees, who also did not claim credit. The CIT(A) found no loss to the Revenue and deleted the penalty for all three years.

4. Tribunal Decision: The Tribunal upheld the CIT(A)'s decision, noting the assessee's detailed explanations and the absence of loss to the Revenue. It found the assessee's belief in non-applicability of TDS provisions reasonable. The Tribunal dismissed Revenue's appeals for all three years.

5. Conclusion: The Tribunal affirmed the deletion of penalties under S.271C for non-deduction of TDS by the assessee, considering the explanations provided and the absence of revenue loss. The decision highlighted the importance of reasonable cause for failure under the relevant provisions and upheld the CIT(A)'s order in favor of the assessee for all the years in question.